It’s Bond ETF Time – Munis Are Yielding More Than Treasuries

Once those same bond insurers got caught up in the mortgage mess…you can pretty much guess the rest: the bond ratings when down a notch or two and yields went up.

In the next three to six months, as all good things, it will come to an end and everything will revert back to the mean. One of two things will happen, says Smith:

1) Treasury yields will have to come up

2) Muni yields will have to come down

In either scenario, if treasury rates go up, it makes the older bonds less valuable. If muni rates come down, you’re in a good position.

Smith sums it up: "It’s a win-win situation."

Among the municipal bonds available:

• PowerShares Insured National Muni Bond (PZA)
• Market Vectors Lehman AMT-Free Int Muni (ITM)
• iShares S&P National Municipal Bond (MUB)
• SPDR Lehman Municipal Bond (TFI)
• PowerShares VRDO Tax-Free Weekly (PVI)
• SPDR Lehman Short Term Municipal Bond (SHM)